- 4 - penalty.3 Petitioners filed a timely petition for review of respondent’s determination. In February 2006, petitioner filed suit against her father and Mr. Falcon in United States District Court alleging that they “fraudulently and unlawfully converted the proceeds” of the annuity contract. The complaint states in part: (1) Mr. Falcon told petitioner that the annuity proceeds, in fact, belonged to Mr. Knight; (2) Mr. Falcon instructed petitioner to write the check for $415,000 in order to return the proceeds to Mr. Knight; and (3) petitioner did not know she was a beneficiary of the annuity contract until respondent began examining petitioners’ 2003 tax return. Discussion In general, the Commissioner’s determinations set forth in a notice of deficiency are presumed correct, and the taxpayer bears the burden of showing that the determinations are in error. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Pursuant to section 7491(a), the burden of proof as to factual matters shifts to the Commissioner under certain circumstances. Petitioners have neither alleged that section 7491(a) applies nor established their compliance with the requirements of section 7491(a)(2)(A) and (B) to substantiate items, maintain records, 3 We assume the difference between the $53,886 taxable amount shown on the information return and the $53,885 listed in the notice of deficiency is due to rounding.Page: Previous 1 2 3 4 5 6 7 8 9 10 NextLast modified: November 10, 2007